FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

DIANNE KNOX; WILLIAM L. 

BLAYLOCK; ROBERT A. CONOVER;

EDWARD L. DOBROWOLSKI, JR.;

KARYN GIL; THOMAS JACOB HASS;

PATRICK JOHNSON; JON JUMPER, On

Behalf of Themselves and the

Class They Seek to Represent,

Plaintiffs-Appellees, No. 08-16645

v. D.C. No.  2:05-CV-02198- CALIFORNIA STATE EMPLOYEES MCE-KJM ASSOCIATION, LOCAL 1000, SERVICE

EMPLOYEES INTERNATIONAL UNION, OPINION

AFL-CIO-CLC,

Defendant-Appellant,

and

STEVE WESTLY, Controller, State of

California,

Defendant. 

Appeal from the United States District Court

for the Eastern District of California

Morrison C. England, District Judge, Presiding

Argued and Submitted

October 9, 2009—San Francisco, California

Filed December 10, 2010

Before: J. Clifford Wallace, David R. Thompson and

Sidney R. Thomas, Circuit Judges.

19875
Opinion by Judge Thomas;

Dissent by Judge Wallace

19876 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
COUNSEL

Jeffrey B. Demain, Altshuler Berzon LLP, San Francisco,

California, for the defendant-appellant.

W. James Young, National Right to Work Legal Defense

Foundation, Inc., Springfield, Virginia, for the plaintiffsappellees.

OPINION

THOMAS, Circuit Judge:

This appeal presents the question of whether a union is

required, pursuant to Chicago Teachers Union v. Hudson, 475

U.S. 292 (1986), in addition to an annual fee notice to members, to send a second notice when adopting a temporary,

mid-term fee increase. Under the circumstances presented by

this case, we conclude that a second notice is not required,

and we reverse the judgment of the district court.

I

A

Congress has long recognized the “important contribution

of the union shop to the system of labor relations.” Locke v.

Karass, ___ U.S. ___, 129 S.Ct. 798, 803 (2009) (quoting

Abood v. Detroit Bd. of Ed., 431 U.S. 209, 222 (1977)). The

Supreme Court has underscored this Congressional policy by

enforcing the right of a union, as the exclusive collective19878 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
bargaining representative of its employees, to require nonunion employees to pay a fair share of the union’s costs. Ellis

v. Bhd. of Ry., Airline and S.S. Clerks, Freight Handlers,

Express and Station Employees, 466 U.S. 435, 448 (1984).

However, the Supreme Court has also recognized the First

Amendment limitation on collection of fees from dissenting

employees for the support of ideological causes not germane

to the union’s duties as collective-bargaining agent. Id. at 447.

In Hudson, the Supreme Court established certain procedural safeguards to balance these interests by requiring “an

adequate explanation of the basis for the fee, a reasonably

prompt opportunity to challenge the amount of the fee before

an impartial decisionmaker, and an escrow for the amounts

reasonably in dispute while such challenges are pending.” Id.

at 310. Notices issued pursuant to this language have become

known as “Hudson notice[s].” Wagner v. Prof’l Eng’rs in Cal.

Gov’t, 354 F.3d 1036, 1039 (9th Cir. 2004).

After receiving a Hudson notice, “the nonunion employee

has the burden of raising an objection, but . . . the union

retains the burden of proof” as to the appropriate proportion

of fair share fees. Hudson, 475 U.S. at 306. It is the policies

underlying Hudson that inform the determination of whether

a Hudson notice is adequate: “Basic considerations of fairness, as well as concern for the First Amendment rights at

stake, . . . dictate that the potential objectors be given sufficient information to gauge the propriety of the union’s fee.”

Id.

B

This appeal involves the adequacy of a Hudson notice

given by SEIU Local 1000 (the “Union”), the exclusive bargaining agent for California state employees. The Union and

the State of California have entered into a series of Memoranda of Understanding controlling the terms and conditions

of employment for employees, including a provision requiring

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19879
that all State employees in these bargaining units join the

Union as formal Union members, or if opting not to join, pay

an “agency” or “fair share” fee to the Union for its representational efforts on their behalf. Id. (known as an “agency shop

agreement”). The agency fee is calculated as a percentage of

the Union dues paid by members of the Union.

The Union issues a Hudson notice to all nonmembers every

June. The constitutionally required notice is meant to provide

nonmembers with an adequate explanation of the basis of the

agency fee. Hudson, 475 U.S. at 310. The notice contains

information regarding the Union’s expenditures from the most

recently audited prior year, broken down by major category

of expense and then, within each category, allocated between

“chargeable” and “non-chargeable” classifications. “Chargeable” expenses are those that are “germane” to the union’s

representational functions, and can be charged to all nonmembers of the union. See Lehnert v. Ferris Faculty Ass’n, 500

U.S. 507, 519 (1991) (Blackmun, J., plurality opinion). “Nonchargeable” expenses are those unrelated to the union’s representational functions, such as partisan political expenditures

or purely ideological issues. Id. The union may charge nonmembers for non-chargeable expenses, but the nonmember

has the option to object, and only be charged a reduced

agency fee based upon the percent of the union’s total expenditures that can be classified as “chargeable.” In addition, the

nonmember is not charged for certain union-sponsored benefits, such as a credit union credit card, that are not available

to nonmembers.

The financial information in the notice forms the basis for

calculating the fee to be paid by nonmembers during the ensuing fee year. The notice also provides that for thirty days after

the notice is issued, nonunion employees can object to the

collection of the full agency fee, and elect instead to only pay

a reduced rate during the upcoming fee year based on the percentage ratio of chargeable expenditures to total expenditures.

During that thirty day period, nonmembers can challenge the

19880 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
Union’s calculation of its chargeable and non-chargeable

expenses, to be resolved by an impartial decision maker. Knox

v. Westly, No. 2:05-CV-02198, 2008 WL 850128, at *2 (E.D.

Cal. Mar. 28, 2008). 

A given agency fee is in effect from July 1 through June 30

of the following year (the “fee year”), at which point the

agency fee set forth in the Union’s next Hudson notice goes

into effect. The 2005 Hudson notice set the agency fee to be

paid by nonunion employees as 99.1% of the Union dues.1

The reduced agency fee of 56.35% of Union dues would be

charged to nonmembers who objected to paying the full

agency fee, and who requested a reduction pursuant to the

procedures and deadlines outlined in the notice. The notice

explicitly stated dues and fees were subject to change without

further notice to fee payers. 

During the summer of 2005, the legislative bodies within

the Union debated and approved a temporary assessment (also

referred to as a dues and fees increase) equal to .0025, or

.25% of Union members’ gross wages. The increase took

effect at the end of September 2005 and terminated at the end

of December 2006, and was expected to raise $12 million for

the Union. 

Specifically, on July 30, 2005 the Union’s Budget Committee proposed an emergency temporary assessment to create

what was termed in the agenda item introducing it as a “Political Fight Back Fund.” This agenda item stated the Fund “will

be used for a broad range of political expenses” in response

to several “anti-union” propositions on the November 2005

special election ballot in California, and that the fund “will

not be used for regular costs of the union—such as office rent,

staff salaries or routine equipment replacement.” Id. On

August 27, 2005 Union delegates voted to implement the tem1As noted, the gap between 99.1% and 100% represents the value of

member restricted benefits. 

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19881
porary dues increase. On August 31, 2005, the Union sent a

letter to all members and agency fee payers stating that they

were subject to the new increase, and that the fund would be

used “to defeat Propositions 76 and 75,” other future attacks

on the Union pension plan, and other activities. 

The Union material indicated that the fund would be used

for political activities. Yet, in response to inquiries, the Union

specifically stated it intended to split the increase “between

political actions and collective bargaining actions.” Further,

not all of the political activities fell into the “non-chargeable”

category. The assessment itself included no spending limitations, and the money was actually used for a range of activities, both political and not, and both chargeable and not.2

Pursuant to the increase, the Controller began collecting additional fees from Plaintiffs at the end of September 2005. 

Plaintiffs represent two classes of nonunion employees,

those who objected to the Union’s 2005 Hudson notice

(“objectors”) and those who did not (“nonobjectors”) (collec2The district court and dissent both conflate political expenses and nonchargeable expenses when condemning the assessment as “purely political” and a drastic departure from usual Union spending. Yet, this is not

supported by the record. The later audit revealed the assessment included

both chargeable and non-chargeable expenses, and the chargeable percentage for the 2006 Hudson notice, which included the spending from the

assessment, was actually larger than that from the 2005 notice. 

In addition, not all political expenses are automatically non-chargeable.

Rather, if germane to collective bargaining, they can be chargeable just

like any other expense. See, e.g., Lehnert, 500 U.S. at 520; Foster v. Mahdesian, 268 F.3d 689, 692 n.6 (9th Cir. 2001); Nat’l Treasury Employees

Union v. Chertoff, 452 F.3d 839, 853, 859-60 (D.C. Cir. 2006) (regulation

allowing employer to unilaterally abrogate collective bargaining agreements fundamentally diminishes a union’s bargaining position and nullifies the right to collective bargaining). Here, Proposition 76 would have

effectively permitted the Governor to abrogate the Union’s collective bargaining agreements under certain circumstances, undermining the Union’s

ability to perform its representation duty of negotiating effective collective

bargaining agreements. 

19882 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
tively “Plaintiffs”). Knox, 2008 WL 850128, at *2. Plaintiffs

initiated this action in November 2005, alleging the assessment violated their First, Fifth, and Fourteenth Amendment

rights under 42 U.S.C. § 1983. Plaintiffs filed for summary

judgment, and the Union filed a cross-motion for partial summary judgment. The district court granted Plaintiffs’ motion

in its entirety, and partially granted and partially denied the

Union’s motion. This timely appeal followed.

We review de novo a district court’s grant of summary

judgment on the sufficiency of the Hudson notice. Cummings

v. Connell, 316 F.3d 886, 890 (9th Cir. 2003). On review, we

must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine

issues of material fact and whether the district court correctly

applied the relevant substantive law. Olsen v. Idaho State Bd.

of Med., 363 F.3d 916, 922 (9th Cir. 2004).

II

A

[1] In reviewing the adequacy of the Hudson notice, we

employ our usual standard of review, as dictated by Hudson.

In that case, the Supreme Court articulated the legal standard

to be applied in this analysis as a balancing test, stating that

“[t]he objective must be to devise a way of preventing compulsory subsidization of ideological activity by employees

who object thereto without restricting the Union’s ability to

require every employee to contribute to the cost of collectivebargaining activities.” Hudson, 475 U.S. at 302 (quoting

Abood, 431 U.S. at 237).

The Plaintiffs argue we should abandon the balancing test

established in Hudson, in favor of strict scrutiny review. They

argue that this case involves compelling their speech on political issues, and that therefore the government-mandated

speech cases, and their application of strict scrutiny should

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19883
apply, citing Riley v. Nat’l Fed’n of the Blind, 487 U.S. 781,

795 (1988) and Rosenberger v. Rector & Visitors, 515 U.S.

819, 827-29 (1995). We disagree. 

[2] First, Hudson itself articulated the legal standard to be

applied, and we are not free to reject the balancing test mandated by the Supreme Court.

Second, we articulated the test in Grunwald v. San Bernandino City Unified Sch. Dist., 994 F.2d 1370 (9th Cir.

1993). We noted in that case that in challenges to the First

Amendment procedure used by unions, the union need not

employ procedures that “would minimize further the burden

on agency fee payers.” Grunwald, 994 F.2d at 1376 n.7. “The

test, after all, is not whether the union and the [employer]

have come up with the system that imposes the least burden

on agency fee payers, regardless of cost (a test no system

could possibly satisfy); rather we inquire whether the system

reasonably accommodates the legitimate interests of the

union, the [public employer] and nonmember employees.” Id.

Therefore, we will apply the normal Hudson balancing and

reasonable accommodation test we have used in the past when

deciding challenges to Hudson notice procedures.3See, e.g.,

Wagner, 354 F.3d at 1039; Cummings, 316 F.3d at 890.

3The dissent takes issue with the characterization of Hudson requirements as a balancing test, focusing instead on language requiring unions

to minimize impingement on nonmembers’ rights and emphasizing the

Union has no “right” to agency fees to be balanced by such a test. The dissent insists a balancing test is inappropriate, yet, there is no other way to

faithfully characterize the procedure set out in Hudson. Hudson acknowledges that competing interests are at play, and describes a particular set of

constitutionally acceptable procedures for attempting resolve with conflict

with fairness to both sides. That is a balancing test. 

In addition, we have consistently recognized that unions have a legitimate interest and “settled” ability to charge agency fees. See, e.g., Cummings, 316 F.3d at 889. We do not intimate this rises to the level of a

constitutional “right,” but that does not mean the union does not have any

rights at all in such a situation. Hudson, 475 U.S. at 302 (affirming union’s

right to “require nonunion employees, as a condition of employment” to

pay fair share fees). 

19884 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
B

[3] Applying the balancing test, we conclude that the

Union did not violate the Hudson requirements. The Supreme

Court in Hudson recognized the impossibility of determining

the chargeability of a union’s anticipated expenditures at the

outset of the fee year, and specifically approved calculating

the present year’s objector fee based on the prior year’s total

expenditures. The Supreme Court explained, “We continue to

recognize that there are practical reasons why absolute precision in the calculation of the charge to nonmembers cannot be

expected or required. Thus, for instance, the Union cannot be

faulted for calculating its fee on the basis of its expenses during the preceding year.” Hudson, 475 U.S. at 307 n.18 (internal quotation marks and citations omitted). Hudson thus

struck a balance between the rights and burdens in this context, acknowledging that a union is not constitutionally

required to take any and all steps demanded by fee payers to

insure that its annual fee notice accurately predicts its actual

spending in the upcoming year. 

[4] Use of the prior year method is a practical necessity

because, for large public sector unions, the Hudson notice

must be based on audited financial statements, with the

union’s chargeable percentage calculation verified by an independent auditor, and the union must send its fee payers the

independent auditor’s report with its Hudson notice. Hudson,

475 U.S. at 307 n.18. The audit requirement renders impossible any method of determining the chargeability of the

upcoming fee year’s expenditures other than basing it on the

prior year’s actual expenditures, because one cannot audit

anticipated future expenditures. Until the money has been

spent, the auditor cannot determine whether the expenditures

which the union claims it made for certain expenses were

actually made for those expenses. Prescott v. County of El

Dorado, 177 F.3d 1102, 1107 (9th Cir. 1999), vac’d &

remanded on other grounds, 528 U.S. 1111, reinstated in relevant part, 204 F.3d 984 (9th Cir. 2000). 

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19885
[5] The inevitable effect of the Hudson “prior year”

method is a lag of at least one year between the time when a

union incurs expenditures and when the audited ratio of its

chargeable expenditures to total expenditures is applied to calculate the objectors’ fee for the next year. Fluctuation is

inherent in such a method: in each year, objectors may be

“underpaying” or “overpaying” fees when compared to the

chargeable percentage of the union’s actual expenditures in

that year because under Hudson’s “prior year” method the fee

is based upon the chargeable percentage of the prior year’s

actual expenses, but the inevitable effect of the Hudson

method is that these over- and undercharges even out over

time. The Hudson notice can never be more than a prediction,

which will inevitably be incorrect as to the union’s actual

expenditures. The Hudson notice is not, and cannot be

expected to be, more than that. 

C

[6] The district court faulted the Union for failing to make

an accurate prediction in its June 2005 Hudson notice of its

actual expenditures in the remainder of that fee year due to

the subsequent enactment of the temporary increase. Yet,

under the normal Hudson procedure, any payments over and

above the Union’s actual chargeable expenditures in the 2005

fee year would be incorporated into the rate for the next fee

year. The Supreme Court has determined that this is sufficiently accurate to comply with the constitutional restrictions.

There is no principled distinction to be drawn between the

paradigmatic Hudson procedure and the one employed here.

Indeed, in the usual Hudson notice situation, the actual

chargeable percentage of a union’s actual spending in any

given year, as well as the precise dollar amount of dues and

fees, will likely vary from the prior year’s figures set forth in

the applicable Hudson notice. The Plaintiffs allege the Union

did not provide a procedure that would avoid the risk that

nonmembers’ funds from the special assessment would be

19886 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
used, even temporarily, to finance nonchargeable activities,

but merely offered dissenters the possibility of a rebate.

Therefore, the Plaintiffs reason, the procedure is unconstitutional. This construction takes the central Hudson concepts

completely out of context and applies them in a way that

would not only invalidate the fee increase, but would invalidate the very procedural system decreed by the Supreme

Court in Hudson. Plaintiffs appear to argue that because the

assessment was to be used for “purely” political reasons, it

could not be constitutionally collected from nonmembers in

the first place, and that any collection and then later incorporation of the non-chargeable amount into a future agency fee

objector rate would be tantamount to an impermissible rebate

of the earlier fee. Yet, the Union had already reduced the fee

for objecting nonmembers, and has demonstrated that the

assessment was not purely non-chargeable, nor intended to be

so. Further, the record belies the assertion that the charges

were used “purely” for non-chargeable expenses.4

The section of Hudson discussing rebates did not condemn

the advance reduction procedure the Union used here, but

rather a “pure rebate” system where the union collects a fee

that is equal or nearly equal to full dues, and then provides a

rebate of the non-chargeable portion to objectors only at the

end of the fee year. See Hudson, 475 U.S. at 305; see also

Ellis, 466 U.S. at 443-44. Here the Union charged objectors

only 56.35% of the temporary increase, the chargeable per4The district court and dissent argue the 2005 Hudson notice is inadequate partly because the prior year method does not speak to the “political” nature of the assessment or the propriety of the Union’s chargeability

determinations. Yet, we have held there is a fundamental difference

between “chargeability” challenges and “procedural” Hudson notice challenges. Wagner, 354 F.3d at 1046-47. Plaintiffs explicitly concede theirs

is only a procedural notice challenge, not a challenge to the Union’s actual

spending of the fees. Since, according to Plaintiffs, chargeability is immaterial to their challenge, their chief argument (and that of the dissent)

premised upon the alleged non-chargeability of the increase (its purely

political nature), must fail. 

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19887
centage set forth in the June 2005 notice, rather than 100% of

the increase followed by a later rebate. 

Additionally, the district court’s direction that a union must

issue a second Hudson notice when it intends “to depart drastically from its typical spending regime and to focus on activities that [are] political or ideological in nature,” Knox, 2008

WL 850128 at *8, is practically unworkable. Union spending

may vary substantially from year to year—in one year there

may be a new collective bargaining agreement negotiated,

resulting in a high chargeable percentage for objectors that is

followed by an election year that results in a low chargeable

percentage for objectors. In fact, for example, the chargeable

percentage for 2006, the year incorporating the fee increase

spending, was higher than that for the 2005 Hudson notice.

[7] Hudson’s prior year method assumes and accepts that

a union has no “typical spending regime,” and that even

though spending might vary dramatically, a single annual

notice based upon the prior year’s audited finances is constitutionally sufficient. Otherwise, a union’s Hudson notice for

an upcoming partisan political election year, following a

negotiating year, could not be based upon the union’s actual

total expenditures in the previous year because the union

would intend in the coming fee year to “depart drastically

from its previous spending regime and to focus on activities

that are political or ideological in nature.” Yet, this is the system set out by Hudson, and no following case has questioned

its continuing vitality. The fact that a projection of expenditures may differ from actual expenditures should surprise no

one. The key analytic point for Hudson purposes is that

proper notice is given and subsequent adjustments made.

The district court’s conclusion was also at odds with our

precedent. The district court required the Union to come up

with a system that imposes the least burden on agency fee

payers. However, the legal requirement for unions in this situation is to establish a system that merely “reasonably accom19888 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
modates the legitimate interests of the union, the [public

employer] and nonmember employees,” as is the Union’s

obligation under Grunwald. 994 F.2d at 1376 n.7; accord

Andrews v. Educ. Ass’n of Cheshire, 829 F.2d 335, 340 (2d

Cir. 1987) (“When the union’s plan satisfies the standards

established by Hudson, the plan should be upheld even if its

opponents can put forth some plausible alternative less restrictive of their right not to be coerced to contribute funds to support political activities that they do not wish to support.”). The

2005 notice satisfied the standards established by Hudson.

The Supreme Court’s decision in Davenport v. Washington

Education Ass’n, 551 U.S. 177 (2007), does not lead us to a

contrary conclusion. In Davenport, the Supreme Court held

the Hudson requirements outline a minimum set of procedures

by which a public sector union in an agency shop relationship

could meet its constitutional requirements, and that state legislatures may place limitations on a union’s entitlement to

fees above those laid out in Hudson. Davenport arose in the

context of the state of Washington enacting legislation requiring unions to give all nonmembers the objector fee rate unless

they affirmatively agreed to be charged for non-chargeable

activities (in contrast to the California rule where silence

equals consent, rather than dissent). Id. at 182-83. Davenport

held that while the “silence equals consent rule” is constitutional, it is also constitutional for a state to make a “silence

equals dissent” rule. Id. at 190-91. Under Davenport, it is

state legislatures, rather than courts, that have the power to

implement higher standards. This holding does not alter our

conclusion in this case that the 2005 notice was adequate to

cover the subsequent dues increase, as Davenport does not

speak to such a situation.

III

[8] The Union’s notice in this case complied with the Hudson procedural requirements. Therefore, we reverse the district court, and remand with instructions to deny the Plaintiffs’

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19889
motion for summary judgment. We also reverse the denial of

defendant’s motion for partial summary judgment regarding

the consent of nonobjectors under California law, and remand

with instructions to grant the motion. We reverse the award

of nominal damages to Plaintiffs.

REVERSED AND REMANDED.

WALLACE, Circuit Judge, dissenting:

I dissent from the majority’s opinion because it is not faithful to the principles guiding the Court’s decision in Chicago

Teachers Union v. Hudson, 475 U.S. 292 (1986). The majority begins from an inaccurate account of the interests at stake,

and applies the procedures set forth in Hudson without due

attention to the distinguishing facts of this case. The result is

contrary to well-established First Amendment principles.

I.

I begin with the legal authorization for the agency shop system because it provides the framework for my evaluation of

the issues in this case, and because I am of the view that the

majority’s opinion presents an incomplete account of the relevant legal principles.

A.

The National Labor Relations Act allows the states to regulate their labor relationships with public sector employees.

See 29 U.S.C. § 152(2). Many states, including California,

allow public-sector unions and government employers to

enter into “agency-shop” arrangements. Lehnert v. Ferris

Faculty Ass’n, 500 U.S. 507, 511 (1991); Cal. Gov’t Code

§ 3502.5(a). Defendant SEIU Local 1000 (Union) is the designated bargaining representative for California state employ19890 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
ees, pursuant to such an agency-shop arrangement. The Union

is legally obligated to represent equally all employees in the

bargaining unit. Lucas v. NLRB, 333 F.3d 927, 931-32 (9th

Cir. 2003). The Union levies a fee on every employee whom

it represents in collective bargaining, even if the employee

refuses to join the Union. See, e.g., Int’l Ass’n of Machinists

v. Street, 367 U.S. 740, 760-764 (1961). The fees paid by bargaining unit employees who are not members of the Union are

commonly known as “agency fees” or “fair share fees.” Plaintiffs in this case are eight nonmembers of the Union, representing a class of approximately 28,000 public employees,

who are required to pay an agency fee.

Agency-shop arrangements present First Amendment concerns. See id. at 749 (union shop presents First Amendment

“questions of the utmost gravity”); Railway Employees’ Dep’t

v. Hanson, 351 U.S. 225, 236-38 (1956). These concerns are

particularly sharp in the public sector: “agency-shop arrangements in the public sector raise First Amendment concerns

because they force individuals to contribute money to unions

as a condition of government employment.” Davenport v.

Wash. Educ. Ass’n, 551 U.S. 177, 181 (2007). The Court

explained in Davenport that “[r]egardless of one’s views as to

the desirability of agency-shop agreements, . . . it is undeniably unusual for a government agency to give a private entity

the power, in essence, to tax government employees.” Id. at

184, citing Abood v. Detroit Bd. of Educ., 431 U.S. 209, 255

(1977).

Despite the infringement of First Amendment rights engendered by the agency-shop arrangement, the Supreme Court

has deemed such arrangements to be constitutionally permissible in principle. See Locke v. Karass, 129 S. Ct. 798, 801

(2009) (holding that “in principle, the government may

require this kind of payment [i.e. agency fees] without violating the First Amendment”). The Court has determined that

agency-shop arrangements are “justified by the government’s

interest in promoting labor peace and avoiding the ‘free-rider’

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19891
problem that would otherwise accompany union recognition.”

Lehnert, 500 U.S. at 520-21; see also Abood, 431 U.S. at 222.

Importantly, however, a union “[may] not, consistently

with the Constitution, collect from dissenting employees any

sums for the support of ideological causes not germane to its

duties as collective-bargaining agent.” Ellis v. Bhd. of Ry.,

Airline, & S.S. Clerks, 466 U.S. 435, 447 (1984). Instead,

nonmembers may only be compelled to contribute a fair share

of costs germane to collective bargaining. See Bhd. of Ry. &

S.S. Clerks v. Allen, 373 U.S. 113, 118-20 (1963). As a corollary, nonmembers have a constitutional right to “prevent the

Union’s spending a part of their required service fees to contribute to political candidates and to express political views

unrelated to its duties as exclusive bargaining representative.”

Abood, 431 U.S. at 234; see also, e.g., Commc’ns Workers v.

Beck, 487 U.S. 735, 762-63 (1988); Price v. Int’l Union,

United Auto., Aerospace & Agric. Implement Workers, 927

F.2d 88, 90-91 (2d Cir. 1991). “The amount at stake for each

individual dissenter does not diminish this concern. For, whatever the amount, the quality of respondents’ interest in not

being compelled to subsidize the propagation of political or

ideological views that they oppose is clear.” Hudson, 475

U.S. at 305.

B.

In addition, procedural protections are constitutionally

required in connection with a union’s assessment and collection of an agency fee. In Hudson, the Court considered

whether a union’s procedure for the collection of agency fees

adequately protected the distinction between germane collective bargaining costs and nonchargeable political expenditures. The Court explained that procedural protections were

constitutionally required in this context for two reasons:

First, although the government interest in labor

peace is strong enough to support an “agency shop”

19892 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
notwithstanding its limited infringement on nonunion employees’ constitutional rights, the fact that

those rights are protected by the First Amendment

requires that the procedure be carefully tailored to

minimize the infringement. Second, the nonunion

employee — the individual whose First Amendment

rights are being affected — must have a fair opportunity to identify the impact of the governmental

action on his interests and to assert a meritorious

First Amendment claim.

Hudson, 475 U.S. at 302-03. The Court held that, “[s]ince the

agency shop itself is ‘a significant impingement on First

Amendment rights,’ . . . the government and union have a

responsibility to provide procedures that minimize that

impingement and that facilitate a nonunion employee’s ability

to protect his rights.” Id. at 307 n.20 (emphasis added), quoting Ellis, 466 U.S. at 455.

In Hudson, the defendant, a teacher’s union, had implemented a fair share fee calculated as the proportion of chargeable expenditures in the preceding fiscal year, that is, those

expenses related to collective bargaining and contract administration. The union also established a procedure for the consideration of nonmembers’ objections. The union failed,

however, to provide nonmembers with any explanation of

how the fair share fee was calculated or explanation of the

union’s procedures. The Court held that the union’s procedure

was inadequate for three reasons: “because it failed to minimize the risk that nonunion employees’ contributions might

be used for impermissible purposes, because it failed to provide adequate justification for the advance reduction of dues,

and because it failed to offer a reasonably prompt decision by

an impartial decisionmaker.” Id. at 309.

First, the procedure at issue in Hudson was constitutionally

deficient because it merely offered dissenters the possibility

of a rebate; it failed to minimize the possibility that dissentKNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19893
ers’ funds would be used for an improper purpose in the first

place. The Court stressed that the union should not be permitted to exact an agency fee from dissenters “without first establishing a procedure which will avoid the risk that their funds

will be used, even temporarily, to finance ideological activities unrelated to collective bargaining.” Id. at 305 (emphasis

added; internal quotation marks omitted), citing Abood, 431

U.S. at 244 (concurring opinion).

Second, the union’s procedures were held constitutionally

deficient because employees had not been provided with sufficient information about the basis of the proportionate share:

“[b]asic considerations of fairness, as well as concern for the

First Amendment rights at stake, also dictate that the potential

objectors be given sufficient information to gauge the propriety of the union’s fee.” Id. at 306. In Abood, the Court had

stated that it was a union’s duty to provide “the facts and

records from which the proportion of political to total union

expenditures can reasonably be calculated.” 431 U.S. at 239-

40, n.40, quoting Allen, 373 U.S. at 122. The Court went further in Hudson, holding that the union was required to provide

this information without awaiting an objection. Hudson, 475

U.S. at 306.

Third, Hudson held that there must be a dispute resolution

procedure. The Court stated that a union must provide both “a

reasonably prompt opportunity to challenge the amount of the

fee” as well as “a reasonably prompt decision by an impartial

decisionmaker.” Id. at 307, 310 (emphasis added). The procedure at issue in Hudson was inadequate because it was controlled by the union and did not provide for an impartial

decisionmaker. Id. at 308 (describing the “ ‘most conspicuous

feature of the procedure is that from start to finish it is entirely

controlled by the union’ ”). The Court further held that a

union must provide an “escrow for the amounts reasonably in

dispute while such challenges are pending.” Id. at 310.

Drawing on these considerations, Hudson outlined three

requirements for a union’s collection of an agency fee: (1) “an

19894 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
adequate explanation of the basis for the fee,” (2) a “reasonably prompt opportunity to challenge the amount of the fee

before an impartial decisionmaker,” and (3) “an escrow for

the amounts reasonably in dispute while such challenges are

pending.” Id. at 310.

C.

Surprisingly, in the case before us the majority characterizes the Hudson “test” as a “balancing test” or “reasonable

accommodation test.” The majority chooses, moreover, to

highlight the Union’s interests, stating that Congress has recognized the “important contribution of the union shop to the

system of labor relations,” and that “[t]he Supreme Court has

underscored this Congressional policy by enforcing the right

of a union, as the exclusive collective-bargaining representative of its employees, to require nonunion employees to pay

a fair share of the union’s costs.”

The majority puts its finger on the wrong side of the scale.

A union has no “right” to the collection of agency fees, and

Hudson does not call for merely a “reasonable accommodation” of employees’ constitutional rights. From the framework

described above, I view the Union’s procedures much differently than the majority. I fear that the majority’s account of

the interests at stake, compounded by its view of the operative

legal test, invites confusion. Indeed, it tampers with vitally

important First Amendment principles.

1.

I cannot begin from the proposition that we are required to

balance the “rights” of the Union against the rights of the

employees it represents. While the majority insists that the

only way “to faithfully characterize the procedures set out in

Hudson” is to “balance” the Union’s “right” to collect agency

fees against the first amendment rights of non-union employees [Maj. Op. 19884 n. 3], it is the majority that is unfaithful

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19895
to Hudson and her progeny. The Union’s collection of fees

from nonmembers is authorized by an act of legislative grace,

not by any inherent “right” of the Union to the possession of

nonmembers’ funds. See Davenport, 551 U.S. at 185. This

should be clear to all. In Davenport, the Court explained that

its agency-fee cases “were not balancing constitutional rights

in the manner [the union] suggests, for the simple reason that

unions have no constitutional entitlement to the fees of

nonmember-employees.” Id. Along similar lines, the Second

Circuit has held that it is error to approach the agency-fee

issue “with a balancing test in which the cost to the union and

the practicality of the procedures were to be weighed against

the dissenters’ First Amendment interests.” Andrews v. Educ.

Ass’n of Cheshire, 829 F.2d 335, 339-40 (2d Cir. 1987).

Davenport considered a Washington state law prohibiting

labor unions from using the agency-shop fees of nonmembers

for election-related purposes unless the nonmember affirmatively consented. 551 U.S. at 185. The Court considered

whether this restriction on a union’s spending of agency fees,

as applied to public-sector labor unions, violated the First

Amendment. The Court emphatically determined that the

restriction did not: “[t]he notion that this modest limitation

upon an extraordinary benefit violates the First Amendment

is, to say the least, counterintuitive.” Id. at 184. The union had

no right to the funds; instead, “[w]hat matters is that publicsector agency fees are in the union’s possession only because

Washington and its union-contracting government agencies

have compelled their employees to pay those fees.” Id. at 187.

Viewed properly, the collection of agency fees is authorized by legislative policy considerations pertaining to labor

relations. Locke, 129 S. Ct. at 803; Abood, 431 U.S. at 222.

There are several justifications for an agency shop, but only

one is implicated in this case: to prevent free-riding by nonmembers who benefit from the union’s collective bargaining

activities. See Davenport, 551 U.S. at 181 (describing the

“primary purpose” of agency-shop arrangements as preven19896 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
tion of free-riding by nonmembers); see also Abood, 431 U.S.

at 222; Ellis, 466 U.S. at 447-48. Political and ideological

expenditures fall outside “the reasons advanced by the unions

and accepted by Congress why authority to make union-shop

agreements was justified.” Lehnert, 500 U.S. at 554, quoting

Street, 367 U.S. at 768.

Thus, the majority is mistaken. The Union’s interest in this

case is not a “right” to nonmembers’ funds. The Union’s

interest lies in receiving a fair contribution to its collective

bargaining expenses. The Union has no legitimate interest,

however, in collecting agency fees from nonmembers to fill

its political war-chest.

2.

The majority describes Hudson as a “reasonable accommodation test.” The majority points to the following statement

from Hudson: “[t]he objective must be to devise a way of preventing compulsory subsidization of ideological activity by

employees who object thereto without restricting the Union’s

ability to require every employee to contribute to the cost of

collective-bargaining activities.” 475 U.S. at 302. The majority also states that a union need not take “any and all steps

demanded by fee payers.” The majority looks to our decision

in Grunwald v. San Bernardino City Unified School District,

which stated: “[t]he test . . . is not whether the union and the

[employer] have come up with the system that imposes the

least burden on agency fee payers, regardless of cost.” 994

F.2d 1370, 1376 n.7 (9th Cir. 1993).

But there is a wide gap between taking “any and all steps

demanded by fee payers” — that is, a least-restrictive means

test — and what the majority endorses. While Hudson does

not require a union to adopt procedures that impose the least

intrusive burden on fee payers possible, the majority affords

the union undue leniency. See, e.g., Andrews, 829 F.2d at

339-40. The majority ignores Hudson’s instruction that,

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19897
because employees’ First Amendment interests are implicated

by the collection of an agency fee, “the procedure [must] be

carefully tailored to minimize the infringement.” Hudson, 475

U.S. at 302-03 (emphasis added). To eliminate any doubt, in

the footnote appended to this statement, the Court cites several cases holding that when First Amendment rights are

implicated, the government must avoid burdening those

rights. Id. at 303, n.11, citing Roberts v. United States Jaycees, 468 U.S. 609, 637 (1984); Elrod v. Burns, 427 U.S. 347,

363 (1976); Kusper v. Pontikes, 414 U.S. 51, 58-59 (1973);

NAACP v. Button, 371 U.S. 415, 438 (1963).

Hudson emphasized, moreover, that “procedural safeguards

often have a special bite in the First Amendment context.”

475 U.S. at 302 n.12 (internal quotation marks and alteration

omitted). In the agency fee context, Hudson described the

goal of procedural protections as to “minimize the risk that

nonunion employees’ contributions might be used for impermissible purposes” even temporarily, id. at 305, 309, and to

“facilitate a nonunion employee’s ability to protect his

rights,” id. at 307 n.20. I therefore conclude that the majority’s “reasonable accommodation test” is misguided and is

inconsistent with case law that we are required to follow.

II.

The Union’s procedures in this case should be evaluated in

light of the principles set forth in Hudson and the legitimate

interests at stake. As the majority has already set forth the

facts of this case in some detail, I recite them only where particularly relevant to my views or where additional detail is

warranted. I also seek to draw more attention to the wellreasoned decision of the district court.

A.

Pursuant to Hudson, the Union issues a notice to agency fee

payers every June. At issue in this case is the Union’s June

19898 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
2005 Hudson notice. That notice set the agency fee to be

extracted from nonmember’s paychecks at 99.1% of full

union membership dues. Nonmembers who objected to paying for nonchargeable expenses would pay a reduced agency

fee, set at 56.35% of full union membership dues. The agency

fees described in the notice were in effect until the following

July, when a new Hudson notice was to become effective. The

June 2005 Hudson notice also provided an objection period of

thirty days, during which nonmember fee payers could object

to the collection of the full agency fee and elect to pay the

reduced agency fee. Some of the plaintiffs in this action

objected to the June 2005 Hudson notice, while others did not.

In the Summer of 2005, shortly after the expiration of the

period for objection to the June 2005 Hudson notice, the

Union’s legislative bodies began discussing a temporary dues

increase. The proposal was described as an “Emergency Temporary Assessment to Build a Political Fight-Back Fund.” The

agenda for a July 30, 2005 Council Meeting described the

purpose of the assessment as follows: “[t]he funds from this

emergency temporary assessment will be used specifically in

the political arenas of California to defend and advance the

interests of members of Local 1000 . . . .” The agenda continued to describe:

These temporary emergency assessments are made

necessary by political attacks on state employees and

other public workers launched by Governor Schwarzenegger and his allies which threaten the wages,

benefits and working conditions of Local 1000 members, and undermine the services they provide to the

people of California.

The Union contemplated that the “Political Fight-Back Fund”

would not be used for the “regular costs of the union . . . such

as office rent, staff salaries or routine equipment replacement.” Instead, the Fund would be used “for a broad range of

political expenses.”

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19899
The Union approved the temporary assessment at the end

of August 2005. The Union’s yearly Hudson notice had been

issued in June 2005, and that notice did not mention the possibility of the later-enacted temporary assessment. After passage of the temporary assessment, the Union sent a letter to

members and nonmembers, dated August 31, 2005, informing

them that “Local 1000 delegates voted overwhelmingly for a

temporary dues increase to create a Political Fight-Back

Fund.” The letter stated that the funds collected from the dues

increase would be used for several political purposes: (1) to

defeat two propositions appearing on the November 2005 ballot (Propositions 75 and 76); (2) to “defeat another attack on

[the] pension plan” in June 2006; and (3) “[i]n November

2006 . . . to elect a governor and legislature who support public employees and the services [they] provide.” The letter

explained that the $45 per month cap on dues would not apply

to the temporary assessment. For sake of clarity, I point out

that this letter did not constitute “notice” as contemplated in

Hudson. The letter did not provide an explanation for the

basis of the additional fees being imposed, and it did not provide nonmembers with an opportunity to object to the additional fees.

After receiving the Union’s letter, some nonmembers

attempted to object to the temporary assessment. For example,

plaintiff Dobrowolski contacted the Union to lodge his objection to the “Political Fight-Back Fund.” He was told, in effect,

that there was nothing he could do about it; he was not

allowed to object. The Union thereafter sent a letter to nonmembers, like plaintiff Dobrowolski, who attempted to object

to the increase in fees. That letter, dated October 27, 2005,

stated in part:

The Union has received your objection to the dues

increase. We understand that you are a political

objector and a fee payer in the Union and that you

have raised an objection to paying this increase

because you believe the money will be directed

19900 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
solely to political activities by the Union. We understand your frustration about paying a little more to

the Union when you have not seen a new contract

with a pay increase. However, we hope that by

explaining the Union’s position concerning this dues

and fees increase, you will better understand our

position. . . .

When we have a campaign that is split between

political actions and collective bargaining actions the

Union is required by law to annually audit the

expenditures for those activities; the Union will fully

comply with this requirement. However, the

Supreme Court has stated that this audit must occur

at the end of the fiscal year in which the activities

take place, because next year’s objecting fee-payer

rate must be based on that audit.

This campaign will entail much workplace organizing divided over two fiscal years. At the end of

each year, the Union’s expenses for these activities

will be audited, and the amount of expense which is

not germane to collective bargaining will be used to

set the objecting fee-payer rate for the next year.

Presently you are an objecting fee-payer who pays

the audited rate for this year. Next year, you will be

able to exercise your objection again and pay the

audited rate set for that year, based on the Union’s

expenditures this year. That rate will fully account

for any political actions of the nature to which you

have objected.

The temporary assessment took effect at the end of September 2005. At that time, the Controller of the State of California, defendant Steve Westly, began deducting the additional

fees automatically from all nonmember employees’ paychecks. Although the assessment was “temporary,” it was cerKNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19901
tainly not of short duration, lasting from September 2005 until

the end of December 2006.

B.

In November 2005, plaintiffs initiated this action in the

United States District Court for the Eastern District of California, contending that the temporary assessment violated

their First, Fifth and Fourteenth Amendment rights. Plaintiffs

alleged, among other things, that the temporary assessment

constituted a seizure of their money for nonchargeable political expenses, without constitutionally required procedural

safeguards. The district court granted a preliminary injunction

to plaintiffs. On cross-motions for summary judgment, the

district court entered summary judgment in plaintiffs’ favor.

There are several important features of the district court’s

summary judgment. First, the district court addressed the burden imposed by the temporary special assessment. The Union

argued that nonmembers who had objected to the June 2005

Hudson notice were assessed only a 14.09% increase in the

deduction from the objector’s salary. The district court opined

that the figure was “somewhat misleading” because it ignored

the fee increase imposed on nonunion employees who had not

objected to the Union’s June 2005 Hudson notice. The district

court indicated that the Union’s quantification of the temporary assessment was misleading in other respects as well, and

that the actual increase in fair share fee for nonmembers

ranged, on average, from 25% to 33%. The district court

deemed this “a material change in the amount of funds nonunion employees were required to contribute to Union expenditures.” The district court concluded, “the fair share fees paid

by both objectors and nonobjectors actually increased by a

much greater margin than Defendants would like to suggest.”

Second, the district court discussed the characterization of

the temporary special assessment. Plaintiffs asserted that the

fund was intended solely for political and ideological pur19902 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
poses. The Union characterized the assessment as “an ordinary dues and fees increase” because, in retrospect, some of

the expenses funded through the temporary assessment were

eventually deemed chargeable to nonmembers. The district

court thought the Union’s position “def[ied] logic.” The

Union had described the proposed assessment as a political

fund, and specifically stated that the fund was not to be used

for regular costs.

Third, taking all of the above together, the district court

concluded that the June 2005 notice did not provide potential

objectors with sufficient information to gauge the propriety of

the Union’s fee, in light of the temporary special assessment.

The June 2005 Hudson notice could not provide adequate

notice as to the temporary assessment because it relied on categories that were not relevant to the temporary assessment.

According to the Union’s statements, the temporary special

assessment was intended for a specific purpose and would not

be used for regular expenses. The district court pointed out

that, “after implementing the increase, the Union took the

position that nonunion employees had already been given an

opportunity to make an informed decision as to the Assessment by means of the 2005 Hudson notice. The Union now

turns a blind eye to the inconsistency inherent in asking nonunion employees to compare apples, in the form of the prior

year’s financials, to oranges, in the form of a new Assessment.”

Finally, the district court concluded that the appropriate

remedy was a second Hudson notice, relying on Wagner v.

Professional Engineers in California Government, 354 F.3d

1036, 1041 (9th Cir. 2004). This remedy had to be made

available to nonmembers regardless of whether they had

objected to the June 2005 Hudson notice, because: “[i]n order

for any nonunion employees’ failure to object to have any

legal significance, the 2005 Hudson Notice must have been

valid and sufficient to cover the Assessment.” The district

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19903
court held that objectors to the second Hudson notice would

be entitled to a refund, with interest, of any withheld amounts.

III.

In this case, the Union failed to protect adequately the First

Amendment rights of nonmembers from whom it collected an

agency fee. In collecting agency fees from nonmembers, the

Union is subject to constraints that are both procedural and

substantive in nature. See Grunwald, 994 F.2d at 1373. Procedurally, the Union did not provide nonmembers with sufficient information to gauge the propriety of the agency fee.

The Union’s June 2005 Hudson notice was insufficient in

light of the temporary assessment. Notably, the Union

adopted no other procedures to protect nonmembers’ First

Amendment rights upon imposition of the temporary assessment. Nonmembers were provided no additional notice,

opportunity to object, dispute resolution procedure, and so

forth. Compounding these procedural failures, there is a substantive problem. The temporary assessment is suspect,

because it was instituted shortly after the June general Hudson

notice and was explicitly and exclusively intended to fund the

Union’s political activities. The temporary assessment was a

special purpose fund that would not be used for regular Union

costs and therefore represented a departure from the Union’s

typical spending regime.1 I do not believe the Union sufficiently minimized the risk that nonmembers’ funds would be

used to subsidize political and ideological activities in light of

these circumstances.

1The majority avers that the special assessment does not represent a

substantial departure from the Union’s ordinary spending. Subsequent

audits, however, revealed that a very substantial portion of the Union’s

assessment, 72.6% in 2005 and 81.2% in 2006, was used for nonchargeable purposes. In contrast, 31.2% of the Union’s total expenses was

determined to be non-chargeable in 2005, and 39.6% was deemed nonchargeable in 2006. The special assessment, therefore, cannot be described

as being consistent with the Union’s usual spending — especially when

the Union explicitly stated that the assessment was necessary for political

purposes. 

19904 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
A.

I first consider the adequacy of the Union’s June 2005 Hudson notice in light of the temporary assessment. The June

2005 Hudson notice provided, in part:

Effective July 1, 2005 through June 30, 2006, the

fee will be no more than 99.1% of regular membership dues. Regular monthly membership dues are

currently 1.0% of monthly gross salary and are presently capped at a maximum of $45 per month. Dues

are subject to change without further notice to fee

payers.

Effective July 1, 2005 through June 30, 2006 (the

“2005-6 Fee Payer Year”) [the Union] will charge

fee payers who object to expenditures not germane

to collective bargaining a fee of no more than

56.35% of regular membership dues for that salary

level.

The notice provided, in addition, for a “Political Action

Reduction:” “Fee payers are also entitled to have their fees

reduced by the pro rata portion of the fee that goes to the

Political Action Fund that [the Union] sets aside for contributions to candidates and initiative campaigns, and other partisan political activities.”

To provide a point of comparison, the Union’s June 2006

Hudson notice, issued after the temporary assessment had

been enacted, provided as follows:

Effective July 1, 2006 through June 30, 2007, the

fee will be no more than 99.1% of regular membership dues. Regular monthly membership dues are

currently 1.0% of monthly gross salary and are presently capped at a maximum of $45 per month. Additionally, a temporary assessment of 1/4 of 1% of

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19905
monthly gross salary is being collected through

December 31, 2006. Dues are subject to change

without further notice to fee payers.

Effective July 1, 2006 through June 30, 2007 (the

“2006-7 Fee Payer Year”) [the Union] will charge

fee payers who object to expenditures not germane

to collective bargaining a fee of no more than 68.8%

of regular membership dues for that salary level.

Regarding the “Political Action Fund,” the 2006 Hudson

notice provided that fee payers were also entitled “to have

their fees reduced by the pro rata portion of the fee that goes

to the Political Action Fund. . . .”

The Union submits that the Supreme Court has approved

the retrospective method by which it calculates the yearly

agency fee: a “look-back” procedure, by which the Union sets

the agency fee for the upcoming year according to the proportion of chargeable versus nonchargeable expenditures in the

prior year. However, the Union’s June 2005 Hudson notice

was not adequate to provide an explanation of the basis for

the agency fee extracted from nonmembers’ paychecks for the

temporary assessment. To reiterate the obvious, the June 2005

Hudson notice provided no information regarding the temporary assessment, as it was enacted subsequently, in August

2005. The Union would respond that the notice was adequate

to cover such future contingencies. How could that be? The

temporary special assessment resulted in approximately a

25% increase in fair share fees — a fairly substantial increase.

Because the temporary assessment was exempted from the

dues cap, higher-earning employees might experience an

effective or actual increase that was even greater. Moreover,

while the assessment was “temporary,” it was in effect for the

bulk of the 2005 fee year, from the end of September 2005

until commencement of the next fee year in July 2006. 

The district court further held that the fee increase was

material, and I agree. The temporary special assessment might

19906 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
therefore have affected a fee payer’s decision to object pursuant to the June 2005 Hudson notice. See, e.g., Dashiell v.

Montgomery County, 925 F.2d 750, 756 (4th Cir. 1991) (“The

test of adequacy of the initial explanation to be provided by

the union is . . . whether the information is sufficient to enable

the employee to decide whether to object”). Indeed, because

the Union refused to give nonmember employees an opportunity to object when information about the temporary assessment was disclosed, these nonmembers were essentially left

in the “dark” about the nature of the agency fee during the

time period in which they were required to file objections. See

Hudson, 475 U.S. at 303 (emphasizing that unions cannot

leave “nonunion employees in the dark about the source of the

figure for the agency fee”). In other words, even though the

special assessment significantly altered the magnitude and

intended use of the agency fee, the Union and the majority

believe that nonmember employees were required to object

before the material information was revealed. Such an

approach simply cannot be reconciled with the procedures set

forth in Hudson. See id.; cf. Locke v. Karass, 382 F. Supp. 2d

181, 190 (D. Me. 2005) (explaining that the use of a previous

year’s financial audit to set the percentage of chargeable fees

would violate Hudson, when a union “cherry pick[s]” certain

financial data, and fails to disclose other material information,

in an effort to increase fees), affirmed by 498 F.3d 49 (2007)

and by 129 S. Ct. 798 (2009).

The Union would respond, I venture, by asserting that the

temporary assessment did not alter the agency fee as a percentage of total union dues. The June 2005 Hudson notice disclosed that the agency fee was 99.1% of membership dues,

and that the objectors’ agency fee was 56.35% of membership

dues. The temporary assessment did not affect these percentages. But such an argument rests on the faulty premise that,

if nonmembers’ fees remain constant as a percentage of members’ dues through a given fee year, any absolute increase in

fees is protected from scrutiny by the yearly Hudson notice,

that is, that the proportionate share is what matters, and

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19907
because this was not altered there can be no constitutional

violation.

I am not convinced that the proportionate share is all that

matters in evaluating the adequacy of a Hudson notice. From

the standpoint of a potential objector, the magnitude of the

increase in fees imposed by the temporary assessment could

very well be material. This increase, as an absolute amount,

could affect a nonmember’s decision to object or not to object

even if the percentage fee remained static. And these nonmembers are the ones whose First Amendment rights are in

jeopardy — not the Union’s. Moreover, the temporary assessment was exempted from the cap on dues. Thus, even though

the fair share fee remained constant as a basic percentage

under the temporary assessment, because the assessment was

exempted from the $45 per month cap on dues, some employees would in fact experience a proportionately greater share

in monthly fee deductions. This is inconsistent with a staticpercentage justification for the Union’s failure to provide

additional notice regarding the temporary assessment.

Furthermore, by exempting the temporary assessment from

the cap, the Union acted contrary to the June 2005 Hudson

notice. The June 2005 Hudson notice, stated: “currently 1.0%

of monthly gross salary and are presently capped at a maximum of $45 per month.” Exceptions from the cap, or the

elimination of it, was not contemplated in the June 2005 Hudson notice. The Union’s June 2005 Hudson notice also stated:

“[d]ues are subject to change without further notice to fee

payers.” I cannot put much weight in this sweeping reservation of assumed authority; in any event, the notice did not disclose that the cap could be eliminated. For these additional

reasons, I conclude that the temporary assessment might be a

material factor in a nonmembers’ decision to object.

I conclude that the Union’s June 2005 notice did not fulfill

its obligations under Hudson. The purpose of a Hudson notice

is to enable informed consent or objection. See Cummings v.

19908 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
Connell, 316 F.3d 886, 895 (9th Cir. 2003), cert. denied, 539

U.S. 927 (2003) (holding that the Hudson notice was designed

to provide nonmembers with information necessary to evaluate whether to object to a union’s calculation of chargeable

expenses); Hohe v. Casey, 956 F.2d 399, 410 (3d Cir. 1992)

(“the issue is whether the notice provided nonmembers with

. . . sufficient information to determine whether they were

only being compelled to contribute to chargeable activities”).

The Union’s June 2005 Hudson notice was inadequate to provide fee payers with a basis on which to adjudge the propriety

of the Union’s agency fee, and to decide whether or not to

object.

Because the Union’s June 2005 Hudson notice was inadequate, an employee’s failure to object to it does not constitute

an effective waiver, an abandonment of a known right.

Lowary v. Lexington Local Bd. of Educ., 903 F.2d 422, 430

(6th Cir. 1990). Until Hudson’s requirements are satisfied,

employees must be afforded subsequent opportunities to

object. See Mitchell v. L.A. Unif. Sch. Dist., 963 F.2d 258,

261-63 (9th Cir. 1992).

The June 2005 Hudson notice was not adequate to provide

notice as to the temporary assessment for an additional reason, which warrants separate attention. The temporary assessment was a special purpose fund. The Union envisioned the

temporary assessment as a political fundraising vehicle, to

build a “Political Fight-Back Fund.” The Union contemplated

that the temporary assessment would provide a distinct source

of capital for political activities and that it would not be used

for the regular expenses of the union.2 Recognizing the unique

character of the temporary assessment has two implications.

2The majority acknowledges that the Union’s August 2005 letter to

members and agency fee payers specifically stated that the fee increase

would be used for political activities. In fact, that letter makes no mention

whatsoever of any non-political reason for the increase. Nevertheless,

based on the October 2005 letter, the majority reasons that the Union “inKNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19909
First, the June 2005 Hudson notice could not be adequate

to enable nonmembers’ informed objection to the agency fee.

The June 2005 Hudson notice contemplated ordinary expenditures; the temporary special assessment stood apart from that.

As the district court stated, the union asked nonmembers to

compare “apples, in the form of the prior year’s financials, to

oranges, in the form of a new [a]ssessment, an [a]ssessment

which was not to be utilized for Union operations but was

instead earmarked for discrete political purposes.” Even if

agency fees remained constant as a percentage of total member dues, nonmembers might well object to paying increased

fees for purely political purposes; for example, they might

object in light of the departure from the Union’s normal

spending regime.

Second, as a substantive matter, the Court has repeatedly

stressed that a union may extract from nonmembers “only

tended to split the increase ‘between political actions and collective bargaining actions.’ ” Maj. Op. at 19881. The October letter, however, does

not state that the fee increase would be split between political and collective bargaining activities. Instead, the letter indicates that the Union would

be undertaking a “year-long campaign” that would be “split” between both

political and non-political functions. Nothing in the letter states that the

“campaign” would be funded exclusively by the assessment. In fact, the

Union’s letter then identified a 2004 “Call the Governor” program, which

apparently was funded by the Union’s general fund from the previous

year, as an example of a non-political “campaign” activity. Thus, when the

August and October letters are read together, it appears the Union intended

to use the fee increase to fund political aspects of the campaign, while it

intended to fund non-political activities with general member and agency

fees. 

Similarly, the majority misapprehends the record when it suggests that

the fee assessment contained no spending limitations. Maj. Op. at

19881-82. When the Union decided to increase fees, its budget committee

indicated that the increase would “not be used for regular costs of the

[U]nion.” The agenda for the counsel meeting, wherein the Union resolved

to increase fees, further states that “[t]he funds from this emergency temporary assessment will be used specifically in the political arenas of California.” These appear to be spending limitations. 

19910 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
those fees and dues necessary to performing the duties of an

exclusive representative of the employees in dealing with the

employer on labor-management issues.” Price, 927 F.2d at

90-91 (internal quotation marks omitted). In Lehnert, the

Court outlined a framework for evaluating whether an activity

was germane to a union’s role as exclusive bargaining agent:

“chargeable activities must (1) be ‘germane’ to collectivebargaining activity; (2) be justified by the government’s vital

policy interest in labor peace and avoiding ‘free riders’; and

(3) not significantly add to the burdening of free speech that

is inherent in the allowance of an agency or union shop.” 500

U.S. at 519.

To protect the distinction between chargeable and nonchargeable activities, a union is required to adopt procedures

that minimize the risk that nonmembers will be compelled to

subsidize political or ideological activities with which they do

not agree.3 In Hudson, the Court explained, “[t]he Union

3The majority incorrectly concludes that Plaintiffs’ appeal “must fail”

because chargeability of the assessment is “immaterial” to their procedural

Hudson challenge. Maj. Op. at 19887 n.4. While it is true that the Plaintiffs in this case do not raise a direct challenge to the Union’s chargeability

determinations, this does not mean that the political nature of the Union’s

special assessment is irrelevant. Indeed, the Hudson procedures were

adopted to provide nonunion employees with a fair opportunity to object

to a union’s use of agency fees for political, ideological, and otherwise

non-chargeable activities. See 475 U.S. at 306 (“Basic considerations of

fairness, as well as concern for the First Amendment rights at stake, . . .

dictate that the potential objectors be given sufficient information to gauge

the propriety of the union’s fee”). Here, the Union’s decision to raise fees

to fund political activities is relevant in determining whether the Union

provided sufficient information for nonunion employees to “gauge”

whether or not to object. 

The majority’s reliance on Wagner, 354 F.3d at 1046-47, is mispled.

While Wagner observed that a procedural Hudson challenge raises different questions than a challenge to a union’s chargeability determinations,

Wagner does not stand for the proposition that the potential chargeability

of a union’s mid-year fee increase cannot be considered in determining

whether a union has satisfied the procedural requirements set forth in Hudson. See id.; Hudson, 475 U.S. at 306. 

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19911
should not be permitted to exact a service fee from nonmembers without first establishing a procedure which will avoid

the risk that their funds will be used, even temporarily, to

finance ideological activities unrelated to collective bargaining.” Hudson, 475 U.S. at 305; Abood, 431 U.S. at 244 (concurring opinion).

The temporary assessment was contemplated as a political

fundraising vehicle; it therefore cannot be justified by the

interest in preventing nonmembers from free-riding on the

Union’s collective bargaining efforts. The temporary assessment clearly burdened the speech of nonmembers. But the

Union undertook no efforts, in connection with the imposition

of the temporary assessment, to minimize the impact on nonmembers’ First Amendment rights. Taking these considerations together, I conclude that, in connection with the

imposition and collection of the temporary assessment, the

Union did not fulfill its obligation to be mindful of nonmembers’ First Amendment rights.

The Union and the majority seek to evade the fact that the

temporary assessment was enacted to fund political activities

by arguing that the fund was ultimately used for some

expenses that were chargeable to nonmembers.4 I agree with

4The Union’s ideological challenge to Proposition 76 cannot be categorized, as the majority attempts, as an expense chargeable to objecting

agency-fee payers. According to the majority, expenses related to the

Union’s political challenge to this ballot measure might be considered

chargeable because Proposition 76 “would have effectively permitted the

Governor to abrogate the Union’s collective bargaining agreements under

certain circumstances.” Maj. Op. at 19882 n.2. A review of Proposition

76, however, reveals that any connection between the Union’s challenge

was too attenuated to its collective bargaining agreement to be considered

a chargeable expense. The purpose of the ballot measure was to limit the

annual amount of total state spending to the prior year’s spending plus a

reasonable amount of growth. See Sec’y of the St. of Cal., Official Voter

Information Guide: Special Statewide Election 60 (2005). It also would

have set aside budget surpluses for future use. Id. To achieve these initia19912 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
the district court’s assessment of the Union’s post hoc rationalization: “[f]ollowing the union’s logic it should be required

only to show that some small fraction of this fund was used

for chargeable purposes in order to justify subverting its Hudson responsibilities.” The district court further reasoned that,

even if the temporary assessment was not intended solely for

political purposes, it was indeed intended predominantly for

political purposes. As such, the district court continued, “it is

clear that the Union’s intent was to depart drastically from its

typical spending regime and to focus [the temporary special

assessment funds] on activities that were political or ideological in nature.”

tives, Proposition 76 allowed the governor to reduce spending under certain circumstances. For instance, if passed, the proposition would have

given the Governor limited “authority to reduce appropriations” for future

state contracts, collective bargaining agreements, and entitlement programs. Id. Thus, properly understood Proposition 76 was a ballot measure

related to the allocation of tax revenue for funding government activities,

which included the amount of financial support available to fund public

employment. See id.

To be sure, there are some limited circumstances where a union’s political activities can be deemed chargeable. According to the Supreme Court,

lobbying or other political activities are chargeable when they directly

relate to “ratification of negotiated agreements by the proper . . . legislative body” or “to acquiring appropriations for approved collectivebargaining agreements.” Lehnert, 500 U.S. at 520. Where, however, as in

the instant case, the “challenged . . . activities relate . . . to financial support of . . . public employees generally, the connection to the union’s function as bargaining representative is too attenuated to justify compelled

support by objecting employees.” Id. Accordingly, contrary to the majority’s contention, the district court and I do not “conflate” political expenses

with non-chargeable expenses. Maj. Op. at 19882 n.2. We simply recognize that the Union’s intended uses for the assessment, all of which pertained to core political activities such as the Union’s challenge to

Proposition 76, cannot be construed as legally chargeable. Additionally, it

is peculiar that the majority even makes the assertion that the Union’s

political expenses would be chargeable if, as the majority avers, “chargeability is immaterial” to the instant case. Maj. Op. at 19887 n.4. 

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19913
In sum, the Union’s procedures were not adequate under

the circumstances. The June 2005 Hudson notice was inadequate to provide nonmembers with sufficient information

from which to evaluate the propriety of the Union’s agency

fee. After enacting the temporary special assessment, the

Union made no effort whatsoever to minimize the infringement of nonmembers’ rights. The Union did not provide

notice regarding the temporary assessment; the Union also did

not provide nonmembers with an opportunity to object to the

temporary assessment. The Union did not provide a procedure

for resolving disputes and did not place disputed amounts in

escrow. Indeed, when nonmembers attempted to object to the

temporary assessment, they were refused a forum for their

dispute and were never provided with the opportunity to

obtain the decision of a neutral hearing officer.

IV.

This brings me to the crux of the Union’s argument: that

Hudson approved calculating an agency fee as the proportion

of chargeable to nonchargeable expenses in the prior fiscal

year. The Union asserts that the prior-year method is virtually

required here, as it is a large public sector union and must calculate its agency fee on the basis of audited financial reports.

Because of the audit requirement, moreover, the Union asserts

that it could not prospectively apportion the temporary assessment between chargeable and nonchargeable expenses.

The majority agrees that the Union complied with its obligations. The majority recites that “absolute” precision cannot

be expected or required in the calculation of an agency fee,

and that the Union cannot be “faulted” for calculating its

agency fee on the basis of the prior fiscal year’s expenditures.

Further, the majority states that the Union could not deviate

from the prior-year method of calculating the agency fee with

respect to the special assessment. The majority explains that

the prior-year method makes lag inherent; in any given year,

an objector might be “underpaying or overpaying,” but “the

19914 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
inevitable effect of the Hudson method is that these over- and

undercharges even out over time.”

This strikes me as a strange argument when dealing with a

First Amendment challenge. First, the Hudson notice procedure is not per se adequate to protect the rights of nonmembers in all situations. Instead, where, as here, there is a

substantial deviation from the normal Hudson process, adaptation is required. Second, the prior-year calculation method

does not establish the adequacy of the June 2005 Hudson

notice nor does it demonstrate that the Union’s procedures

were adequate when viewed as a whole.

A.

We should not measure the Union’s conduct by the discrete

Hudson procedures alone. Hudson establishes a floor. See

Keller v. State Bar of Cal., 496 U.S. 1, 17 (1990). In Davenport, the Court stressed, “we have described Hudson as ‘outlin[ing] a minimum set of procedures by which a [publicsector] union in an agency-shop relationship could meet its

requirement under Abood.’ ” 551 U.S. at 185.

Here, the temporary assessment was not like the Union’s

ordinary dues and not like the facts presented in Hudson. Several features of the special assessment distinguish this case.

The temporary assessment was imposed mid-year and not in

the normal course of the Hudson process. The temporary

assessment imposed a material increase in agency fees over

those contemplated in the Hudson notice, and was exempt

from the dues cap (which was inconsistent with the Hudson

notice). Hudson did not consider a fee increase outside of a

normal periodic notice process. Likewise, Hudson did not

contemplate a special-purpose assessment, as here. Even

assuming the Union did here what was done in Hudson, it

could not be sufficient to satisfy its duties in light of the

unique circumstances of this case.

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19915
I cannot agree with the proposition that the Union’s June

2005 Hudson notice satisfied the Union’s obligations to nonmembers until issuance of the next yearly Hudson notice. The

Union’s mid-year conduct cannot be insulated from scrutiny.

Rather, there must be some limitation on a union’s imposition

of fee increases between Hudson annual notices.

B.

The Union contends that it complied with the procedures

set forth in Hudson, because the Court approved the calculation of an agency fee based on the proportion of the prior

year’s chargeable to nonchargeable expenditures. Indeed, in a

footnote, the Court stated that a union “cannot be faulted for

calculating its fee on the basis of its expenses during the preceding year.” Hudson, 475 U.S. at 307 n.18. The Union represents, furthermore, that its hands were tied with regard to the

temporary assessment, because it is required to base its

agency fee calculation on audited financial statements. See

Knight v. Kenai Peninsula Borough Sch. Dist., 131 F.3d 807,

812-13 (9th Cir. 1997), cert. denied, 524 U.S. 904 (1998);

Prescott v. County of El Dorado, 177 F.3d 1102, 1006-09 (9th

Cir. 1999), vacated and remanded on other grounds, 528 U.S.

1111, reinstated, 204 F.3d 984 (9th Cir. 2000).

The prior-year calculation method used here does not satisfy all of the Union’s obligations, however. The Union’s

allocation of expenses as chargeable or nonchargeable presents a distinct issue in the adequacy of its Hudson notice. See,

e.g., Seidemann v. Bowen, 499 F.3d 119, 127 (2d Cir. 2007)

(there is a “clear distinction between the adequacy of a

union’s notice . . . and the propriety of a union’s chargeability

determinations”); Hudson v. Chicago Teachers Union, 922

F.2d 1306, 1309, 1314 (7th Cir. 1991) (pointing out that a

party had confused adequacy of the notice with the accuracy

of the fee itself). Thus, even if the Union “cannot be faulted”

for relying on prior-year expenditures in calculating the

agency fee, it is not relieved from its other Hudson obliga19916 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION
tions. The Union must still provide adequate notice to enable

an informed decision, an opportunity to lodge objections, a

prompt hearing on objections by a neutral decisionmaker, and

escrow of any amounts in dispute. Even if we look only to

compliance with Hudson, therefore, the Union still falls short

of the mark.

I recognize that the Union, in relying on prior-year expenditures as the basis for its agency fee, is subject to an audit

requirement. In my view, application of the audit requirement

relates to the appropriate remedy in this case, a question we

do not reach. A district court, with a proper record, could

evaluate the audit requirement in light of the temporary

assessment. Indeed, the purpose of an audit is to verify that

a union actually spent the amount of money it claims; the

audit is not intended to verify the union’s allocation as a

“legal, not an accounting, decision regarding the appropriateness of the allocation of expenses to the chargeable and nonchargeable categories.” Andrews, 829 F.2d at 340; accord

Gwirtz v. Ohio Educ. Ass’n, 887 F.2d 678, 682 n.3 (6th Cir.

1989); Ping v. Nat’l Educ. Ass’n, 870 F.2d 1369, 1374 (7th

Cir. 1989). In any event, the audit requirement does not relate

to the other Hudson protections implicated by this case, and

is ultimately of limited help to the Union. Even a temporary

violation of the First Amendment is a significant violation.

V.

The majority construes the issue in this appeal as “whether

a union is required . . . to send a second notice when adopting

a temporary, mid-term fee increase.” By framing narrowly the

issue in this case, the majority shifts attention to the remedy

adopted by the district court. But the district court’s remedy

is only one consideration in this case — one we do not even

reach — and should not be set up as a strawman for attack.

In this case, the Union’s provision of an annual Hudson

notice was insufficient to enable nonmembers to protect their

KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION 19917
First Amendment rights upon imposition of the temporary

assessment. The Union, furthermore, made no effort to minimize the infringement of nonmember’s First Amendment

rights despite substantially increasing the fees extracted from

their paychecks. I believe that the majority’s opinion does not

carry out the principles of Hudson. I therefore dissent.

19918 KNOX v. CALIFORNIA STATE EMPLOYEES ASSOCIATION